Market Report - 07/09/2023
Rising oil prices sees Dollar rally continue
Vast volatility continues to dominate the FX markets. The USD continues to gain strength off the back of rising oil prices whilst the GBP slides off back of peak inflation forecast.
Vast volatility continues to dominate the FX markets. The USD continues to gain strength off the back of rising oil prices whilst the GBP slides off the back of peak inflation forecast.
In the US:
Analysts predict that the increase in oil prices will help the U.S. dollar as growth is predicted to stay weak and inflation rates are expected to remain high in non-oil exporting nations.
In the United States, GDP continues to outpace forecasts relative to China and Europe and as a result, the U.S economy may be less likely to suffer such stagflationary conditions.
Following the longest winning streak in more than four years, oil prices are once again resting close to recent highs as OPEC+ officials extended supply restrictions through the end of 2023.
Beyond oil, Bank of America asserts that the dollar should benefit from predictions if the U.S. Federal Reserve will continue to keep interest rates higher, for a longer period of time. This being said, FOMC member Cohen comments that "the magnitude and timing of expected rate cuts should matter more for the USD than, say, a +/- 25bp difference in the peak," the markets are still open to the possibility of another Fed rate hike before the cycle reaches its peak.
Moving back to the UK:
Following remarks from Bank of England Governor Bailey that interest rates were approaching a peak, the GBP/EUR rate was once again unable to sustain levels above 1.17. These occurrences highlights difficulty for the Pound to make a clear break higher. Following today's BOE release, the rate has stumbled to daily lows of 1.1625.
Interest rate expectations decreased after Bank of England Governor Andrew Bailey told British parliamentarians that rates would not increase much more and that inflation was expected to decline significantly over the next few months.
The statement completed a technical rejection of the recent gain in GBP/EUR, in the vicinity of 1.1740 and in doing so, strengthened a hard ceiling for the exchange rate that doesn't appear to be breaking any time soon.
With the above in mind, if you have an immediate requirement which requires a quote, or if you would like further information, please do get in touch.